Armida Salsiah Alisjahbana, Under-Secretary-General of the United Nations and Executive Secretary of the Economic and Social Commission for Asia and the Pacific (ESCAP). Courtesy photo

*Armida Salsiah Alisjahbana

The global trade environment is shifting rapidly, and Asia and the Pacific is on the front lines.

New US tariffs announced in April have sent reverberations through global value chains, threatening export earnings, jobs and investment across the region. For economies already struggling to meet the Sustainable Development Goals, this adds additional hurdles to overcome.

Many countries in the region are deeply integrated into global value chains. Cambodia and Việt Nam, where over a quarter of exports are US-bound, could see significant drops in trade revenue if retaliatory tariffs or disruptions escalate. Countries like Lao PDR, Mongolia and Brunei Darussalam, which are part of upstream supply chains, face indirect but potentially larger knock-on effects.

For economies with narrow export bases and high reliance on imported inputs, the tariff burden can be particularly significant, in contrast to larger economies with sizeable domestic markets or more diversified export structures which are more ready to absorb trade shocks.

Export-oriented sectors, such as textiles and machinery, particularly in smaller and less diversified economies, are especially vulnerable. These sectors are often labour-intensive, hiring many lower-skilled and women workers who could face disproportionate risks of employment loss. Meanwhile, business investment and strategic decision making are affected by unpredictability, potentially constraining future economic growth.

Although the intensity of these impacts varies, the broader outcome is clear: heightened uncertainty is dampening regional trade flows, deterring investment and complicating long-term development.

To respond effectively given this evolving landscape, policymakers should take a longer-term view on reforms and put in place forward-looking strategies, even as they seek stability in the near term.

An important step is to deepen evidence-based analysis to identify where risks and gaps lie, including through assessing both direct and indirect exposure to the tariffs through value chain linkages. Tailored support for hard-hit export sectors, especially for micro, small and medium-sized enterprises, will be vital.

Governments should also accelerate trade digitalisation – streamlining customs procedures, adopting cross-border paperless trade systems and enabling seamless data flows across supply chains – to reduce trade costs and improve efficiency.

At the same time, governments should aim for broader structural resilience and diversify trade partners and products in the long run, reducing over-reliance on any single market. These steps can cushion the impact of future trade shifts and help smaller exporters stay competitive.

Expanding trade in digitally delivered services, such as in financial, business and various professional services, offers a promising pathway. These sectors have been less affected by recent trade tensions and could help offset some of the disruptions in goods trade. Countries can also prioritise policies that promote domestic consumption, foster innovation and address supply-side constraints, thus expanding their development base and reducing vulnerability to external shocks.

Strategic potential may lie in the possible realignment of global supply chains towards Asia and the Pacific. Countries graduating from least developed status and facing the loss of trade preferences, as well as middle income countries striving to move up the value chain, could leverage new avenues and invest in economic diversification and industrial upgrading.

More fundamentally, policy coherence, stability and predictability must remain key to trade, investment and business engagements. In an environment where uncertainty undermines economic confidence, especially for smaller or more exposed economies, upholding a transparent, multilateral rules-based system is more important than ever.

Regional cooperation and integration will be increasingly critical.

Reinforcing intra-regional trade and investment can reduce exposure to global disruptions and help build more resilient economic ecosystems. Deeper engagement in subregional mechanisms such as ASEAN and mega trade agreements like RCEP and CPTPP, along with initiatives such as ESCAP’s Framework Agreement on Facilitation of Cross-border Paperless Trade, offers a way forward.

Regulatory convergence and harmonisation, enhanced supply chain linkages and cross-border trade digitalisation should be prioritised to strengthen connectivity and competitiveness. To further aid smaller and less developed economies with limited trade negotiation and policy capacities, governments could consider reducing or exempting tariffs on their goods. As countries navigate an increasingly volatile global environment, such collaboration will be crucial to support policy adaptation to shifting dynamics.

The Asia-Pacific region has bounced back from past crises, but today’s challenges require coordinated, forward-looking responses. With the right policies and strengthened regional partnerships, countries can turn current trade headwinds into an opportunity to build more inclusive, diversified and resilient economies. ESCAP stands ready to support countries in this effort through targeted technical assistance, regional dialogue platforms and data-driven tools such as the Trade Intelligence and Negotiation Adviser (TINA) and Value Chain Analyser that help governments diagnose vulnerabilities, prioritise interventions and coordinate policy responses.

The decisions made now will determine whether the region emerges stronger or more vulnerable in a reshaped global trade landscape.

*Armida Salsiah Alisjahbana is the Under-Secretary-General of the United Nations and Executive Secretary of the Economic and Social Commission for Asia and the Pacific (ESCAP).